We are sticking with last week's labeling of the DOW and S&P 500 having started new medium-term cycles on Oct. 30, and the NASDAQ 100 having started a new medium-term cycle on Sept. 21. All three cycles are in their early phase and have been typically bullish. All cycles are bullish in their early stage, but as they progress forward, they can either stay bullish and rally through most of their cycle, peak late and fall quickly and steeply to their bottom, or they can turn bearish, peak early and fall gradually over the major portion of their cycle. It's not clear yet which pattern the current cycles will follow, but that should become more apparent over the next few weeks.
Let's first look at the DOW and S&P 500. The DOW rallied strongly from its Oct. 30 low (26,143) and made a new all-time high this week on Monday (Nov. 16) at 29,964. The S&P 500 rallied from its low on Oct. 30 (3,234) to make a new all-time high last week on Nov. 9 at 3,644. Both highs were in our reversal zone, and each fell on one of our "pivot points" (Nov. 9 and Nov. 16) which means a significant reversal could be happening here. We also have a case of intermarket bearish divergence because the two highs were not in the same week. OK...it seems like a sub-cycle correction is underway, and the overall cycle trend appears to be bullish. We will consider buying if the DOW can get down to around 28,700 and the S&P 500 down to around 3,400. For now, we remain on the sidelines of the DOW and S&P 500.
The NASDAQ 100 (E-mini, Dec. contract chart) already had its first significant sub-cycle correction with its 10,942 low on Nov. 2. It could come down for another low this week or next to around 11,350. If it does, that may be a good spot to buy. But if this index pushes higher today (Friday) or next week, it could challenge and exceed last week's high before giving us another corrective dip and possible buying opportunity. What we really need to see soon, however, is a new all-time high in the NASDAQ 100 (above 12,449) to confirm that this market is still bullish and worth buying into. We will stay on the sidelines of the NASDAQ for now.